The Fed has enacted multiple aggressive interest rate hikes so far to reduce inflation and bring the economy back to balance. Despite rising recession fear, the retail industry has performed well this year with steady consumer spending. Retail sales rose 8.2% in September from a year ago. In addition, online consumer spending rose in October as consumers took advantage of early holiday shopping discounts and deals offered by retailers.
Though recession possibilities are high, Bank of America CEO Brian Moynihan believes that consumers still have strong credit, unemployment is low, and wage growth is strong, which should help the retail industry perform well. He said that U.S. consumer spending is experiencing a “mitigation of growth” but not a slowdown.
The Kroger Co. (KR)
KR, a retailer in the United States, operates combination food and drug stores, multi-department stores, marketplace stores, and price-impact warehouses.
On October 18, KR announced the official opening of its newest Customer Fulfillment Center (CFC) in Michigan, which will leverage advanced robotics technology and creative solutions to redefine the experience for customers in the greater Detroit area. This should enhance the company’s customer value and revenue streams.
On October 14, KR and Albertsons Companies (ACI) announced a definitive agreement under which the companies will merge to expand customer reach and improve proximity to deliver fresh and affordable food to approximately 85 million households with a premier omnichannel experience. This should be strategically beneficial for the companies.
On September 15, KR declared a quarterly dividend of $0.26 per share, payable on December 1, 2022. The company has 16 consecutive years of dividend growth. Its $1.04 annual dividend yields 2.21% at its current share price.
KR’s sales increased 9.3% year-over-year to $34.64 billion in the fiscal second quarter ended August 13. Its operating profit increased 13.7% year-over-year to $954 million, while its adjusted EBITDA came in at $7.63 billion, up 10.9% from the year-ago value. Moreover, the company’s adjusted EPS improved by 12.5% year-over-year to $0.90.
Street expects KR’s revenue for the fiscal year ending January 2023 to come in at $148.23 billion, indicating an increase of 7.5% year-over-year. The company’s EPS is expected to grow 11% year-over-year to $4.08 in the same year. Moreover, the company surpassed the consensus EPS estimates in each of the trailing four quarters, which is commendable.
The stock has gained 11.4% over the past year to close the last trading session at $47.26. It gained 3.1% over the past month.
KR’s strong fundamentals are reflected in its POWR Ratings. It has an overall A rating, which translates to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
It has a B grade in Growth, Value, and Quality. The stock is ranked #5 of 38 stocks in the A-rated Grocery/Big Box Retailers industry.
In addition to the POWR Rating grades highlighted above, you can see KR ratings for Sentiment, Momentum, and Stability here.
Albertsons Companies, Inc. (ACI)
ACI operates food and retail drug stores in the United States. The company offers groceries, general merchandise, health and beauty care products, pharmacy, fuel, and other items and services through its food and drug stores or digital channels.
ACI’s $0.48 annual dividend yields 2.34% at its current share price. The company declared its latest quarterly dividend of $0.12 on October 18, payable on November 14, 2022.
For the second quarter ended September 10, 2022, ACI’s net sales and other revenues increased 8.6% year-over-year to $17.92 billion, while its operating income increased 9.3% year-over-year to $531 million. Its adjusted net income and net income per share came in at $418.3 million and $0.72, up 13.2% and 12.5% year-over-year, respectively.
For the fiscal third quarter ending November 2022, ACI’s consensus revenue estimate of $17.45 billion indicates a 4.3% year-over-year increase. Also, the company’s revenue for the current fiscal year is expected to increase 6.5% year-over-year to $76.56 billion. Moreover, ACI also beat Street revenue estimates in each of the trailing four quarters.
Over the past month, the stock has gained 5.3% to close the last trading session at $20.39.
It is no surprise that ACI has an overall A rating which translates to a Strong Buy in our POWR Ratings system. The stock also has an A grade for Value and a B for Quality. In the same industry, it is ranked #7.
Click here to access ACI’s additional POWR Ratings for Growth, Stability, Sentiment, and Momentum.
Casey’s General Stores, Inc. (CASY)
CASY operates convenience stores under the Casey’s and Casey’s General Store names. It offers a range of food products, beverages, tobacco and nicotine products, health and beauty aids, automotive products, and other non-food items.
On November 1, CASY announced its continued expansion of alternative fuel options to cater to the evolving guest needs and as part of its environmental stewardship efforts. In addition, the company added its 11th Tesla Supercharger at Urbana, Illinois. This should help CASY drive growth as well as promote sustainability.
On September 7, CASY declared its quarterly dividend of $0.38 per share, payable to its shareholders on November 15. The company pays a $1.52 dividend annually, translating to a yield of 0.65% at the current price. Its dividend has grown at a 7.9% CAGR over the past five years and a 6.2% CAGR over the past three years. CASY has raised its dividend for 23 consecutive years.
For the fiscal first quarter ended July 31, 2022, CASY’s total revenue increased 40% year-over-year to $4.46 billion. Its net income increased 28.3% from the year-ago period to $152.93 million, while its adjusted EBITDA grew 20.6% year-over-year to $293.21 million.
Street expects CASY’s revenue for the fiscal year ending April 2023 to increase 22.7% year-over-year to $15.89 billion. The company’s EPS for the same period is expected to grow 10.4% year-over-year to $10.05. Moreover, the company has an impressive earnings surprise history as it surpassed Street EPS estimates in three of the trailing four quarters.
The stock has gained 15.9% over the past year and 18% year-to-date to close the last trading session at $234.91.
CASY’s POWR Ratings reflect this promising outlook. The stock’s overall A rating translates to a Strong Buy in our proprietary rating system.
It has a grade B for Growth, Value, Sentiment, and Quality. CASY is ranked #2 in the Grocery/Big Box Retailers industry.
Get additional ratings for CASY’s Momentum and Stability here.
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KR shares were trading at $47.23 per share on Monday afternoon, up $0.13 (+0.28%). Year-to-date, KR has gained 5.82%, versus a -14.79% rise in the benchmark S&P 500 index during the same period.
About the Author: Komal Bhattar
Komal's passion for the stock market and financial analysis led her to pursue investment research as a career. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities. More...
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